Premiums on Individual Policies See Steep Hike

WASHINGTON -- People who buy health insurance on their own experienced, on average, a 20% increase in the cost of their premiums over the past year, according to a survey by the nonprofit Kaiser Family Foundation.

Notice of an impending increase -- received by 77% of the 1,000 people surveyed -- led some to cancel their policy and buy a new, cheaper one, so the overall premium increase for those buying individual insurance was about 13%.

By comparison, people who buy insurance through their employer on the group market saw an increase of only about 5%.

The survey was put in the field after the Patient Protection and Affordable Care Act (PPACA) became law, and its release comes in the midst of ongoing debate about rate hikes by health insurers.

The new law requires insurance companies to justify large rate increases and provides for federal subsidies to those who can't afford insurance on their own, and makes it illegal for insurers to deny coverage based on preexisting medical conditions. But most of those provisions don't take effect until 2014.

In the meantime -- according to news reports and the new Kaiser Family Foundation survey -- it appears insurers are raising rates, particularly in the individual-buyer market. Those policies are generally subject to fewer regulations.

Large rate hikes in the individual market came under intense scrutiny after WellPoint's California subsidiary, Anthem, requested rate increases of as much as 39% for some of its individual customers. Following outrage by federal and state officials, Anthem rescinded the proposed hike.

"There was a lot of consensus in the [healthcare reform] debate that the non-group market had a lot of problems," explained Kaiser Family Foundation's vice president Gary Claxton in a Monday afternoon briefing.

Despite agreement that the individual marketplace has problems, it's relatively quite small -- just 14 million people under age 65 are covered by individual health insurance plans, making it the least common source of insurance. By contrast, about 157 million people have employer-sponsored health plans.

Although data generally suggest that those in the individual market pay a greater share of their healthcare costs than those in the group market, there is a limited amount of data on who buys individual plans and what costs are associated with them.

To get a better picture, Kaiser Family Foundation researchers surveyed a nationally representative sample of 1,038 individuals with non-group insurance coverage from March through early April, 2010.

The largest percentage of respondents -- 45% -- said they are self-employed or own a small business.

About a quarter said they buy their own insurance because either their employer or their spouse's employer doesn't offer insurance, or they do offer insurance, but it is too expensive.

About one in 10 said they are retired but not yet eligible for Medicare, and a similar number said they are between jobs.

Those in the individual market are slightly older than those in the group market (an average age of 46 compared with 43), but report similar health statuses -- 47% reported having a preexisting medical condition.

Survey respondents said they pay an average premium of $3,606 for an individual policy, and $7,102 for a family policy.

On top of the premium costs, people who buy insurance on their own reported paying, on average, $1,690 in out-of-pocket costs in the past year ($924 for an individual, and $2,688 for a family). Those costs include deductibles and copays.

Just over 10% percent reported out-of-pocket costs of more than $5,000 on top of their premiums, and six in 10 said that paying for their insurance is a burden. That's nearly twice the number of people with employer-sponsored plans who said it was difficult for them to afford insurance.

Robert Zirkelbach, a spokesman for America's Health Insurance Plans (AHIP) said insurance costs are rising because healthcare costs are growing unabated.

"Unless there is a greater focus on underlying medical costs, the costs of coverage are going to continue to increase," he told MedPage Today.

The Senate Health, Education, Labor, and Pensions (HELP) committee recently held a hearing on a bill sponsored by Sen. Dianne Feinstein (D-Calif.) that would give the federal government authority to approve or deny rate increases proposed by health insurance companies.

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